Miscellaneous Investment Products

Question 1

When were ISAs introduced

Answer 1

1999

Question 2

What age is a normal ISA available to?

Answer 2

Over 16

Question 3

What age is a stocks and shares ISA available?

Answer 3

18

Question 4

What investment can’t an ISA hold

Answer 4

Unquoted shares

Question 5

When someone dies, what can their spouse do regarding ISAs

Answer 5

They can make an additional subscription to an ISA on top of their £20000 limit.

Question 6

What forms of stocks and shares ISAs are there?

Answer 6

Unit trust and OEIC
Investment trust
Self-select
Managed - offered by stock brokers
Corporate - wrapper around a companies shares
Derivative - offered through off shore structures

Question 7

What charges might occur with ISAs

Answer 7

Usually 5% intial charge and annual of 1-1.5%
Potential commision
Other charges such as an annual report

Question 8

What is an innovative finance (IF) ISA?

Answer 8

ISA that allows investment in peer to peer lending and crowdlending.

Introduced in 2016

Question 9

What are the rules with IF ISAs

Answer 9

Minimum age 18
Better return/higher risk. No middle man and loans with less scrutiny.
Peer to peer lending is not covered by FSCS
No equity partition.

Question 10

What are the rules for help to buy ISAs?

Answer 10

Available over 16
First time buyer
£1200 lump sum start up £200 a month
25% bonus up to maximum of £3000 (£12000 saved)
House price maximum £450000 in London £250000 outside.
No new ones can be set up.

Question 11

What are the rules for LISA

Answer 11

Ages 18-40 to open
Save up to 50 years old
Can be taken as cash over 60

Question 12

What are the rules on junior ISAs (JISAs)

Answer 12

£9000pa
Under 18 uk residents or Crown servant
No allowed child trust fund, but legacy one can be transfered
16 yes old manages the money can be taken at 18.

Question 13

Describe child trust funds (CTF)

Answer 13

Legacy scheme started in 2002 and stopped 31/07/2010.

Initially £250 given by the government was lowered to £50 until it was replaced by JISA

£9000 pa
Can be taken at 18.

Question 14

What are the rules for stakeholder cash ISAs

Answer 14

No charges
Minimum deposit of no more than £10
Unlimited withdrawals
Interest of no less than 1% bellow the BOE base rate.

Question 15

What are the rules for stakeholder stocks and shares ISAs

Answer 15

Maximum annual charge of 1.5% for the first 10 years 1% after
Minimum subscription of no higher than £20
No more than 60% invested in riskier assets (shares and property)
Smoothing to be applied where a ‘with profits’ fund applied.

Question 16

What position does a buyer/seller of a future hold?

Answer 16

Buyer - long
Seller - short

Question 17

How does a future agreement work?

Answer 17

An initial margin is held by a middle man by both sides
The price is monitored, and a variation margin is paid.
This pays out when closed.
Failure to pay variation closes contract and by buying a reverse contract and charging this to the client.

Question 18

What is a call option?

Answer 18

The option to buy at a certain time or price.

Question 19

What is a put option?

Answer 19

The option to sell at a certain time or price

Question 20

What is an option to based on time called?

Answer 20

European-style

Question 21

What is an option based on price called

Answer 21

American-style

Question 22

What are the terms for what an option is worth?

Answer 22

In profit or in the money- in profit
Under- out of money
Equal- at the money

Question 23

How can derivatives be used in a portfolio?

Answer 23

To hedge for future purchase
To hedge a portfolio
To achieve different asset allocation in the short term without having to physically sell
Speculating

Question 24

How does tax work for derivatives

Answer 24

CGT for most people unless classed as traders, then this is classed as income.

No CGT for individual traders on gilts or qualifying corporate bonds

Question 25

Discribe hedge funds.

Answer 25

Specialist investments where a fund manager uses techniques such as derivatives and buying stocks which they believe to be undervalued with the objective of achieving an absolute return.

It is unlikely to be restrained by a benchmark. Looks to make absolute return with low volatility.

Can gear.

Often, it has no correlation with the market.

Question 26

How do most people access hedge funds?

Answer 26

Through funds made up of a number of hedge funds.

Question 27

Where do hedge funds normally operate out of?

Answer 27

Territories such as the cayman Islands or Bermuda.

Question 28

How much is the usual minimum investment in a hedge fund.

Answer 28

1m or tend to have high charges.

Question 29

What are the tactics used by hege funds?

Answer 29

Long/short funds
Absolute return
Relative value
Event-driven
Tactical trading

Question 30

How does long/short funds work?

Answer 30

Combines long short buying selling

Question 31

How does absolute return work?

Answer 31

Uses longs/shorts to achieve a positive position no matter the market condition

Question 32

Describe relative value strategy

Answer 32

Identifying and exploiting price anomalies between a combination of investments

Question 33

Discribe event driven strategy

Answer 33

Involves using price movements from anticipated corporate events to achieve high returns

Question 34

Describe tactical trading strategy

Answer 34

Invests across a wide range of asset classes and adopts sub strategies such as short/long selling.

Question 35

What are absolute return funds?

Answer 35

Funds that attempt to achieve positive returns in all market conditions

Question 36

What is a structured product?

Answer 36

Uses zero-coupon bonds combined with options to achieve capital protection.

Question 37

What are structured products that offer no protection called?

Answer 37

Structured Capital at Risk Products (SCARPs)